Following approval by the Securities and Exchange Commission (SEC) this summer, the Financial Industry Regulatory Authority, Inc.’s (FINRA) new rules governing equity and debt research are being implemented over the course of the coming months. The new consolidated rule governing equity research, FINRA Rule 2241 (New Equity Research Rule), represents modifications to a scheme that has been in place since 2003 following the Global Research Settlement and the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) directive to the SEC to oversee the implementation of rules designed to manage and mitigate conflicts of interest between research and investment banking. The new rule governing debt research, FINRA Rule 2242 (New Debt Research Rule), represents the first time FINRA rules will regulate communications regarding debt securities as research.
The New Equity Research Rule becomes effective in two stages with an initial tranche implemented on September 25, 2015 and the remainder going into effect on December 24, 2015. The New Debt Research Rule becomes effective on February 22, 2016.
This Sidley Update provides an in-depth look at the new rules and highlights some of the key differences between the new and outgoing requirements that firms should consider in evaluating their policies and procedures. Section A discusses the broader implications of the new rules in the evolution of research regulation. Section B highlights key concepts and provisions of the rules, followed by comprehensive assessments of the provisions of the New Equity Research Rule and New Debt Research Rule in Sections B.1 and B.2, respectively.
If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work, or
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David M. Katz
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Barbara J. Endres
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